Download this Paper Open PDF in Browser

Pledge of Demat Shares and Its Implications Under Takeover Code

Company Law Journal, July 2011

8 Pages Posted: 31 Jul 2011  

Murtuza Bohra

Associate at Bohra Associates Indore

Date Written: July 30, 2011

Abstract

The present article intends to discuss and analyze the decision of SAT in Liquid Holding Pvt. Ltd. v. The SEBI (Appeal No.83 of 2010, dated March 11, 2011). The case presents a situation involving the pledge of the certain shares in dematerialized form with a bank. When the appellant company defaults the bank invokes the pledge and get the share transferred. These demat shares are again transferred back to the appellant company when the loan is repaid. Thus, this case involves an interesting ground for study the provisions of the Takeover Code, Depositories Act and Company Act inter alia. The issue involved was whether re-transfer of shares from Lakshmi Vilas Bank to Liquid required, Liquid to make an open offer to all shareholders of the Target as the acquisition triggered its obligation under Reg. 11(1) of the SEBI Takeover Regulations. The SAT held that when shares are pledged with the bank they become beneficial owners of it and when the loan is repaid the there is a retransfer of shares into demat account of the pledgor. Therefore, it is mandatory to comply with provision of the takeover code when the shares are being re-transferred.

Keywords: Pledge, takeover, SAST, Depository Act, Liquid Holding Pvt Ltd

Suggested Citation

Bohra, Murtuza, Pledge of Demat Shares and Its Implications Under Takeover Code (July 30, 2011). Company Law Journal, July 2011. Available at SSRN: https://ssrn.com/abstract=1899031 or http://dx.doi.org/10.2139/ssrn.1899031

Murtuza Bohra (Contact Author)

Associate at Bohra Associates Indore ( email )

M-47, Trade Center, 18/2, South Tukoganj
Indore
India

Paper statistics

Downloads
128
Rank
191,870
Abstract Views
563